Will a Delaware court honour a forum selection clause when suit was filed first somewhere else?
Yes. Forum selection clauses are presumptively valid and should be specifically enforced unless the resisting party clearly shows that enforcement would be unreasonable and unjust, or that the clause is invalid for reasons such as fraud and overreaching, with reasonableness assessed case by case. Where the parties have expressly agreed on a legally enforceable forum selection clause, a court should honour the contract and enforce the clause even if, absent the clause, the McWane principle (which favours a stay when a prior action involving the same parties and issues is pending elsewhere in a court capable of doing prompt and complete justice) would require a different result, because McWane is a default rule of common law the parties are free to displace by contract.
The trap
The clause beats the race to the courthouse, and it can be enforced by anti-suit injunction: in Ingres the Delaware court enjoined a party from prosecuting its own first-filed California action. Two further wrinkles. The clause is read across a family of related agreements: in Ingres the Court of Chancery, affirmed on its reasoning, held that the one related agreement without a forum clause did not supersede those that had one. And Delaware forbids ousting its own courts in two places. In corporate documents, 8 Del. C. § 115 forbids a charter or bylaw provision that prohibits bringing internal corporate claims in Delaware courts, and requires any forum provision for other stockholder claims to leave open at least one Delaware court. In construction, 6 Del. C. § 3507(e)(5) makes it void for a construction contract or subcontract to require a dispute between contractor and subcontractor to be governed by another state's law or to be litigated, arbitrated or mediated outside Delaware. That construction void has its own boundary, and it is the one a Delaware public-works subcontractor would be caught by: § 3507(f) provides that the section does not apply to public works contracts awarded under Chapter 69 of Title 29, to contracts for the erection of six or fewer residential units under simultaneous construction or for the alteration or repair of a single residential unit, or to contracts for the purchase of materials by a person performing work on that person's own real property. Inside those three categories § 3507(e)(5) does not void anything, and the ordinary Delaware forum-clause law above governs.
9 authorities
The words that state the rule
Consistent with the ruling of the United States Supreme Court in M/S Bremen v. Zapata Off-Shore Co., 7 we hold that where contracting parties have expressly agreed upon a legally enforceable forum selection clause, a court should honor the parties’ contract and enforce the clause, even if, absent any forum selection clause, the McWane principle might otherwise require a different result. 8 *1146 The reason is that the McWane principle is a default rule of common law, which the parties to the litigation are free to displace by a valid contractual agreement.
- statute6 Del. C. § 3507enactment date not established
The words that state the rule
(e) It shall be against public policy and shall be void and unenforceable for any provision of a construction contract or subcontract agreement to: (1) State that a contractor assumes the risk of nonpayment of the owner; (2) Require a contractor to waive any statutory or other right to commence litigation or arbitration until payment is made to the general or prime contractor; (3) Make subject to payment by the owner the obligation of a contractor and its surety under any payment or performance bond to make any payment to a claimant under such bond; (4) State that a contractor relies on the credit of the owner and not on the credit of the general or prime contractor or of a bonding company; or (5) Require a dispute or claim between the contractor and subcontractor to be governed or subject to the laws of a state other than Delaware or require litigation, arbitration, mediation or other dispute resolution processes to occur in a state other than Delaware.
- statute6 Del. C. § 3507enactment date not established
The words that state the rule
(f) This section shall not apply to: (1) Public works contracts awarded under Chapter 69 of Title 29; (2) Contracts for the erection of 6 or fewer residential units which are under construction simultaneously, or for the alteration or repair of any single residential unit; or (3) Contracts for the purchase of materials by a person performing work on that person’s own real property.
The words that state the rule
Given the broad forum selection clauses included in the parties’ related agreements, the Court of Chancery did not err in enjoining Ingres from prosecuting its breach of contract claims in California.
The words that state the rule
In McWane, this Court held that Delaware courts should exercise discretion in favor of a stay where a prior action, involving the same parties and issues, is pending elsewhere in a court capable of doing prompt and complete justice. 5 As Justice Herrmann explained, this rule was “impelled by considerations of comity and the necessities of an orderly and efficient administration of justice.” 6 We reaffirm that holding.
The words that state the rule
“Forum selection [ ] clauses are ‘presumptively valid’ and should be ‘specifically’ enforced unless the resisting party ‘[ ] clearly show[s] that enforcement would be unreasonable and unjust, or that the clause [is] invalid for such reasons as fraud and overreaching.’ ” 9 Courts should assess the reasonableness of a forum selection clause on a case-by-case basis.
The words that state the rule
Ingres argues that the Court of Chancery erred because one of the executed agreements between the parties did not contain an express forum selection clause. But in denying Ingres’ motion to stay, the Court of Chancery explained that in determining which contracts governed the various disputes, the court must consider the entire collection of related contracts, including those that contained forum selection clauses specifying Delaware or New York courts as the chosen forum. After considering and interpreting all of the related agreements, the Court of Chancery concluded that the agreement that did not contain a forum selection clause did not supersede those that did.
- statute8 Del. C. § 115enactment date not established
The words that state the rule
(a) The certificate of incorporation or the bylaws may require, consistent with applicable jurisdictional requirements, that any or all internal corporate claims shall be brought solely and exclusively in any or all of the courts in this State, and no provision of the certificate of incorporation or the bylaws may prohibit bringing such claims in the courts of this State.
- statute8 Del. C. § 115enactment date not established
The words that state the rule
(c) With respect to claims that are not internal corporate claims, the certificate of incorporation or bylaws may require stockholders, when acting in their capacity as stockholders or in the right of the corporation, to bring any or all such claims only in 1 or more prescribed forums or venues, if such claims relate to the business of the corporation, the conduct of its affairs, or the rights or powers of the corporation or its stockholders, directors or officers; provided that such requirement is consistent with applicable jurisdictional requirements and allows a stockholder to bring such claims in at least 1 court in this State that has jurisdiction over such claims.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.